Westar Resources (ASX: WSR) shares are up 53% today on the announcement that they've hit thick bands of pegmatites at the Olga Rocks site. It's possible that this is us being excessively cynical when we describe this as hitting rock. You know, drill into the ground and hit rock? Well done lads. That is us being excessively cynical though. Much too much so. For every mining project does have to start with someone checking exactly what type of rocks underlie a particular piece of the scenery. That's what mining exploration actually is, checking the rocks.
The ambition here is to find those pegmatites, the rocks which sometimes to often do contain a lithium, caesium, tantalum concentration that's of interest. The other name for this is spodumene containing pegmatites and they are one of the two major sources of lithium in this modern world. As we all know lithium is quite the current metal to be searching for. Having found pegmatites it might well be true that there is significant lithium in them.
One thing that we all need to grasp here. Going looking for caesium is not a sensible plan. The world's major source has been on a care and maintenance basis for some years now simply on price grounds. Thinking about caesium for what it tells us of the geology is fine, but trying to mine it not so much.
Westar Resources share price from ASX
The specific announcement is here. Stripping that announcement of all the technical talk what it's really saying is that they've found the sort of rock which might contain that lithium, caesium etc. They haven't checked, as yet, whether it actually does. So, we're a long way from any news that this is actually an economic deposit of anything at all. It really is - right type of rock, now let's see what's in it.
It's possible to think that 53% is a bit too much of a rise on that news alone. We have to admit that we're less than fascinated by the lithium market itself. Yes, of course a substantial find would be value additive. But not all that much to our thinking. For there are simply so many people out there exploring for lithium - and finding it - that we don't expect the current elevate price to last all that long. Indeed, it's off 50% from its peaks of last autumn already.
We've already pointed out that caesium mining isn't a money maker. It's traditionally been true that tantalum provides a secondary income for spodumene mining (actually, back in the 1990s, Greenbushes was run as a primary tantalum mine, the lithium being the byproduct) but the one thing we are absolutely certain about is that the tantalum price is going to take a heavy beating in coming years. For there are so many new spodumene miners, all chasing that lithium price - this inevitably means more tantalum production. We are so certain of this that we‘re rather disappointed that there's no listed primary tantalum producer - we'd short it if we could.
The real point about Westar Resources is that this find at Olga Rocks is very early days yet, it's possible that a 53% rise in enterprise value on the back of it is a bit too much.